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Creative Financing for High Vacancy Apartment Building

HAYLEN Case Study

The Challenge

Our out-of-town client was looking for a multifamily building in the Silicon Valley area to purchase and we had to identify within a 45-day identification period. 

We have begun our search process and identified a value add opportunity in the prime location of Santa Clara: close to major tech companies and nestled in a multi-million dollar neighborhood. The exterior of the building was recently updated, but it is 40% vacant due to the COVID Pandemic. The market cap rate for this area is in the sub 3 range, and none of the banks was willing to finance such investment due to the high vacancy.

The Strategy    

We identified a few strategies: Hard or Bridge Money Lender or Seller Financing. We negotiated agreeable terms with a 1-year term seller financing and close within 30 days. During escrow, our client was able to work with her existing bank to obtain an affordable bridge loan with 50% down. 

The Result

Upon closing of the transaction, we worked with our client’s property manager and the contractor team with an affordable upgrade design and timeline. Within 3 months, we were able to complete renovation for 6 units and increase rents from $1500 to $2100. This way, not only does the property have increased value, with full occupancy, but our client can also refinance the property into conventional financing with much favorable financing terms.

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